Now that the incandescent bulb is phasing out, I expect the LED lighting industry to really start to take off in 2014. Larger companies like Cree (CREE) will benefit but the global market is large enough that the smaller companies can also benefit. One of the companies I have been following and written about before is ForceField Energy (FNRG). Let's take a look at what is happening with incandescent bulbs and update ForceField's position in this growing market.
PHASING OUT INCANDESCENT LIGHT BULBS
Thanks to a law in 2007 to set higher efficiencies for minimum efficiency standards, incandescent bulbs will not be manufactured anymore starting in 2014. They just cannot keep up with the fluorescent or the new LED light bulbs when it comes to saving energy.
While compact fluorescent light bulbs (CFLs) have grown in popularity, the LED-based bulbs are at the forefront of the future of bulb technology. One of the challenges LED is facing, however, is the huge difference in the price of CFL and LED bulbs.
While a six pack of 60 W incandescent bulbs generally goes for about $4.67 at Home Depot, a six pack of the same bulbs of LED lights manufactured by Cree can go for as much as $77.82. Although more pricey, the LED bulbs last 15 times longer than a fluorescent and are 80% more efficient.
Incandescent Versus LED Bulbs:
- A high efficiency incandescent bulb costs about $1.50 and uses 28% less power.
- While a 40-watt LED goes for about $7.50, it uses 85% less energy than a traditional bulb.
- LED will consume about $2.00 in power under normal circumstances over the course of a year.
- That compares to over $7.00 for an incandescent
- LEDs last for 20 years and pay for themselves in two years, the rest is all savings.
T12 BULBS ALSO GOING AWAY
For years, the fluorescent T12 bulbs were the choice of building contractors because the costs were low and they also lasted much longer then incandescent bulbs. T8 bulbs eventually took their place in popularity because the electric ballast it used was more efficient than the magnetic ballast of the T12s. Then came the T5s, which took some extra investment, but the LED replacement tubes on the market are also making their mark.
The biggest factor with LED tube replacements is price. These LED lights could cost as much as 10 times as much. Even though they are expensive, they also have certain advantages.
- They can last 50,000 hours or more
- Use less power
- Operate without a ballast
- Do not contain hazardous mercury
Over time, the use of the bulb pays for itself and the rest is pure savings.
There are some issues that plague fluorescent bulbs that LEDs do not have. The LEDs turn on faster, do not contain mercury and give off the same soft glow as the round incandescent bulbs.
According to the EPA, about 12% of a homeowner's bill goes toward lighting. Since there are some health concerns with the fluorescent bulbs, the benefits of the LEDs will continue to be demonstrated and companies that sell LED lights could benefit long term.
I mentioned before that I wrote about ForceField Energy. The last article I wrote mentioned some of the contracts in place as well as the strong leadership of the company. I still believe that the company is a good long-term play for a growth oriented investor.
Since the last article I wrote, the company appears to have built a solid base and has continued to move up, increasing in value by about almost 3.5% in December on higher volume as we enter into 2014.
ForceField Energy is one of those companies ready for the transition to take place with exclusive distribution rights of the high quality LED lighting units manufactured by Lightsky out of Shanghai, China.
The company has planned aggressive marketing in North America, Latin America, the Caribbean and Europe by building a network of sub-distributors that can target large scale customers which would gain long-term benefits from upgrading to LED lighting. Some recent alliances the company has formed for distribution are:
- Prime Energy Solutions AG- Germany
- First Choice Energy- Ireland
The company not only offers LED lighting solution packages, but also attractive financing options showing how reduced maintenance and operating costs can "fund the installation and operations" within a two or three year period.
Presently, ForceField management believes that many of the current trial and LOIs will convert into large long-term contracts for the installation of LED systems that should translate into multi-millions of dollars of revenues over a multi-year period if the current LED and smart meter projects with signed initial agreements follow through.
The Comptroller's General Office of the Republic of Costa Rica awarded FNRG the contract to supply and install LED street lights in the government agency's parking lot. It also formed an alliance with the University of Costa Rica for a project to support and demonstrate the health benefits of LED lighting. The company has more than $40 million in LOIs in Costa Rica alone.
This is a growth investment opportunity for a company just positioned for long-term growth in the LED lighting field just starting to grow.
With all these types of investments, there is risk involved, but the contracts and LOIs for the company look good long term.